Keystone Innovation Zones created to lure entrepreneurs

State-designated districts called Keystone Innovation Zones are at the heart of efforts to make Pennsylvania and Philadelphia havens for companies that employ well-educated people in high-paying jobs.

The zones are meant "to create opportunities for entrepreneurs to grow companies in the communities near the [state's and city's] college campuses," said Richard Overmoyer, deputy secretary of Pennsylvania's Office of Technology Investment.

Other state efforts to attract so-called knowledge workers focus on stimulating the development of the biotechnology industry and encouraging venture capital firms to invest in Pennsylvania companies.

Further efforts focus on boosting the amount of money available to startups and making the area a hub for nanotechnology research and commercialization.

The Keystone Innovation Zone program was established after the legislature passed Gov. Edward G. Rendell's economic stimulus package on March 31.

Under it, colleges, universities and other post-secondary schools can partner with local businesses and economic development organizations to have the areas around their campuses designated Keystone Innovation Zones. The program provides incentives for the schools to transfer technology to companies that establish operations in their zone.

The state has approved proposals for 10 zones, including one around the University of Pennsylvania and Drexel University that was submitted by the Science Center, Penn, Drexel and BioAdvance.

The Science Center is a nonprofit organization owned by 31 colleges, universities, hospitals, foundations and nonprofits. It runs technology parks in Philadelphia's University City section and Newark, Del., and an incubator called the Science Center Port in Philadelphia's University City.

BioAdvance, which is based in the Science Center Port, is one of three organizations established by the state to boost the biotechnology industry.

The University City Keystone Innovation Zone is part of the plan by new Science Center CEO Pradip Banerjee to shift the organization's emphasis to commercializing technology developed by its owners.

"We're going to provide some very significant value for new life sciences and technology companies to come here," Banerjee said.

BioAdvance and Quaker BioVentures, a Philadelphia venture capital firm, raised a $26 million venture fund that Quaker will manage. BioAdvance hopes the fund can attract venture capitalists from other areas to invest alongside it in Pennsylvania companies.

Getting venture capitalists from other areas to invest in Pennsylvania companies is the purpose of the New Pennsylvania Venture Guarantee Program, which also was part of the governor's economic-stimulus package. The program will guarantee up to $250 million of venture investments made in Pennsylvania companies by qualified venture firms.

Another part of the stimulus package, the New Pennsylvania Venture Capital Investment Program, will provide up to $60 million in loans to venture firms that invest in Pennsylvania companies.

Innovation Philadelphia's program to help companies receive seed funding had a good 2004, according to Richard Bendis, president and CEO of the economic development organization, which was created by the City of Philadelphia and receives public and private funds.

More than half the 12 companies that received money from Innovation Philadelphia's Economic Stimulus Fund have gotten follow-on fundings, most at higher valuations, Bendis said.

The most notable was TurnTide Inc., a Conshohocken maker of an anti-spam router that was founded in January and sold in July for $28 million to Symantec Corp.

Area nanotech initiatives continued to receive funding in 2004.

Pennsylvania contributed another $3.5 million to the Nanotechnology Institute, which was established with a $10.5 million state grant to Ben Franklin Technology Partners of Southeastern Pennsylvania, Drexel and Penn in 2001.